The eFishery Scandal and its impact to Southeast Asia with Kristie Neo
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So that was back in 2021 and then after Revolution Precrafted, there was Zalingo in 2022 and then Tiny Harm and Investory which were P2P lenders in 2018-2024 and then E-Fishery. So actually every single year we've been getting pretty big blow-ups but as I was looking at the cases for each of them, one thing I've noticed is the sophistication of the fraud is actually becoming more advanced.

Welcome to Analyze Asia, the premier podcast dedicated to dissecting the pulse of business technology and media in Asia. I'm Bernard Leung, and while the Southeast Asia ecosystem went from the boom to the off the Kool-Aid, the cases of alleged and actual fraud cases in startups are exposed.

What are the implications to the startup and venture capital ecosystem in Southeast Asia? With me today, Kristi Neo, an independent journalist covering tech and venture capital in the emerging markets to help us break down these difficult issues. So Kristi, welcome to the show. And I'm a fan of your article. Thank you so much for having me, Bernard. Thank you. Yeah, let's start from your origin story. So how do you start your career?

Okay, so my career started actually in Channel News Asia, now known as CNA. I think those who live in Singapore or spend time in Singapore would be more familiar with the channel. So it's basically the main broadcaster in Singapore. And

The kind of coverage for CNA is actually APAC Southeast Asia and the wider APAC region, right? So I started off as a producer there, started off in current affairs and then moved to business news. And actually that was where I gained my exposure into business and finance because my background really wasn't in business and finance at all.

transitioned into business news and just fell in love with business news. And it just stayed on. And I think I tell this story very often. One of the things that I really took with me during my time in CNA was about telling the Asian perspective to stories. And that's something that I still very much strongly believe in, the importance of local storytelling, the importance of local journalism. Fast forward, the stint that I guess I'm most

well known for was my time in DSA. So in between, of course, I did a few stands in CNBC, I did a bit of digital advertising in We Are Social. And then before landing in Deal Street Asia, which is a Nikkei-based publication. And that was where I joined in 2018, which was really, I would say, the beginning of the upswing of the PEVC ecosystem in Southeast Asia. We already had a couple of unicorns at that time. So like Grab Gojek was the main unicorns at that

one time. And if you guys recall, that was really also the time where the rivalry between the right-hand healing giants as well as the e-commerce guys. That was really the time when Master Yoshi-san gave it. SoftBank just gave their money. And then the unicorns became DecaCons. And it's coming back to give money again. Yeah, exactly. So, you know, the cycle is coming back around. And then the unicorns became DecaCons. And then back then, everyone was asking like, oh, do you have any major IPOs? We don't have enough exits. And then all of a sudden, we're doing around $22

2021, right? We began to see a couple of IPOs. So to be able to grow with the ecosystem, and then of course, after 2021, when the markets corrected, so did the private capital market, both from the US before trickling down to Southeast Asia. So I think it was interesting to cover both sides of the market, because as you would know, the ecosystem is still really young. We have never really experienced a real correction, at least the one that

we are in at the moment, the downturn that we're in at the moment. So the kinds of stories that we were telling was so drastically different from the time that I started where everything was just about fundraising, everything was just about valuations. And then now you're beginning to hear more of like stories of like down rounds and layoffs and consolidations and corporate governance issues like the ones that you mentioned. So a lot more, I guess, kind of negative stories, which I

I guess it's still needed. I know a lot of people, I often get this from people. They're like, oh, wow, Christy, we need more positive stories. The other story that comes out.

These days, you know, it's about some scandal or like somebody pocketing money or like... We'll get that. We'll get that. I think the one common line, I actually agree with you. And it was also the same for myself as well. I think we are trying to tell the stories from the Asian perspective. So from your career journey, given that you have been in different media outlets, whether they are very, very big traditional media outlets to even...

startup-like type, like New Street Asia, for example, and we are social. What are the key lessons you can share with my audience from your career journey? Wow. Well, my personal...

yeah, my personal journey between bigger outlets and smaller outlets. I personally prefer actually working with the smaller outlets. Even though I did actually enjoy my time in CNA, it was actually quite a crazy time. And actually, CNA is quite a big, it is a really, really big company. Like, there are actually a lot of people there. But,

the setup for the business team back then was actually pretty small because there weren't that many people who were interested to do business. So I was very lucky actually to work in a relatively small type team. And even in DSA as well, I worked in a... the team isn't actually really big. There are only like 30 people inclusive of editorial, which means if you take out the admin guys, you know, it's probably like 20 of us. And yet I feel like when you work in a smaller team,

You are a lot more nimble. You are more hands-on experience. You know, you really got to kind of roll your sleeves up and just kind of like hustle and work, which I kind of prefer that kind of environment a lot more than working in a larger institution. So I was working in CNBC for a short while as well.

which really wasn't a good culture fit for me. I thought back then that, you know, American companies like, oh, you have a bigger platform, which you did, you know, and there's a bit of a branding and a bit of a halo effect that comes with working for a big brand, whether it's like

Bloomberg or CNBC or Reuters and all that. But when you start working in some of these larger companies, you really have to face the bureaucracy of a lot of things, not just on the admin front, but even on the editorial side as well. And you don't really, at least that's how I felt, like you don't really have a lot of room, like editorially to kind of work on stories that may be really interesting. I think a lot of it still comes down to the leadership of the teams, the

editorial leadership as well about the kinds of stories that they want to do and larger organizations have a specific formula that works for them but the nice thing about working in DSA was I joined a

when we were about five years old, four or five years old. So we were kind of like an up-and-coming kind of media publication where some people knew about us, but the broader landscape, media landscape, like, they didn't really recognize us or even actually take us very seriously at that point in time. Like, we would get left out of a lot of, like, media launches from all the big, you know, like the Temasek, like the Google Temasek reports and all these types. And I would be so mad, like,

I'm like, why does Tech in Asia get invited? Or why does Bloomberg get invited and we don't get invited? So, you know, you really got to really push yourself to get out there so that people get to know you. So I enjoy that part of the journey and not everyone likes it.

but I enjoy it maybe because I like working hard. But yeah, it's fun and it's very rewarding because when five years, like, you know, I was there for like six years, at the end of the six years, like people actually finally take notice of us. And you also build some sort of brand value around what we stand for as a publication and to kind of establish that perception and that company brand values as well, I think it's,

it's very rewarding, you know? So yeah. So I probably, that's a pretty good reflection. I think it is the same as well, even for me, if I analyze Asia over the last 10 years as well, and I could actually get my first interview with the Google Sea report, I think actually starting from their sixth year.

And just after a while, and last year, I actually finally got to do with them in the studio with all the three, Google, Tamase, and Bain together on the podcast. So it's their whole journey of trying to build the media outlet, get a reputation, proceeding to today. I totally get that feeling because I've done it for both SGE, which got acquired by Tech in Asia, and also for Analyze Asia. Now, I want to get to the really the main subject of the day.

whether is the Southeast Asia boom really officially over? That was the first instinct when I read your article. Don't worry, for my audience, I'm going to put a link to that on LinkedIn. It's got Thank You E-Fishery. Southeast Asia is officially off the Kool-Aid. I think as someone who has followed the Southeast Asia startup and VC ecosystem, I think your perspective is invaluable, especially in all these scandals like the E-Fishery one.

I think let's go into that story first. Can you talk about the e-fishery scandal? Before that, actually, we have seen Penny Hub, which was also another fraud case in Indonesia, and an alleged fraud.

That means it's not proven about the CEO Zalingo as well by former Secor India now pick 15 on that. Can you just talk about giving me some brief chronological overview of the e-fishery events and what are the first signs and how did the story actually unfold? I think it broke from Deep Street Asia, if I didn't remember wrongly. Yeah, that's right. So actually, I think from what I understand, DSA actually started writing about it, a

around the end of last year. So just to be clear, I wasn't the one who broke the story, even though I think if you self-publish the op-ed, suddenly people will join the connection. I was in DSA before, but yeah, I think they did a really good job in breaking the story. So the first signs actually came around towards the end of last year and there were already rumblings. Actually, to be very honest, even when I was still in DSA last year, like about a year ago,

before any of this was even out in the public domain, I was already hearing kind of investors just like making jabs, you know, like if a shiri goes down, this is it. Maybe not this is it. Things will get really bad. To begin with, there's no reason for you to even say something like that because for those who are not familiar with the Southeast Asian ecosystem, I think e-fishery was...

Not only are they unicorn, I mean, there are a couple of unicorns in Southeast Asia right now, but they were, they had a pretty good

deck of institutional investors who were on that cap table. And I'm talking like the likes of IFC, you've got South Bay Virgin Fund, you've got the Abu Dhabi G42 Fund, right? As well as Temasek, which is... Yeah, our local sovereign wealth fund. Yeah, so of course, and also quite a number of well-known VC firms that

including Northstar, which is a very big Indonesian, started off as a PE firm and then ventured into VC. And I understand has taken quite a bit of a hit from E-Fishery as well as other local VCs. So

for them to all be shareholders in E-fishery and they were also seen as one of the most prominent unicorns in Indonesia. Yeah, for them to be involved in this kind of scandal, obviously, it's not a good look on the part of especially investors, right? Because they raised a lot of money on a lot of pretty high valuation. Valuation, yeah. I think it's something of hundreds of millions in that order of magnitude and then got that billion dollar valuation in their last round.

Yeah. So yeah, they're a fish feed company. So they started off basically as developing this, what they call like a fish feeder. So it's like a contraption where if you put it into some of these fish farms and then you can automate it or whatever, like you will feed the fish and it helps the

the farmers, fish farmers or shrimp farmers, be able to monitor and control the amount of feed that they are feeding the fish. From what I understand, there's a lot of wastage and loss that usually when it comes to feeding fish,

You just toss it out. There's no control process. So the idea is that by driving more transparency and control over the fish feed, how much you're using, how much goes out and all that, you are able to control costs and therefore drive more efficiency and drive better yields. And in turn, you are able to drive, raise farmer incomes as a result of that because farming is still a very kind of, how do you say, it's a very informal sector, right? But I think that's also where

the problem lies, not just for iffistry, but I think also for the larger kind of like any kind of business, like tech-enabled kind of business, right? Because we look at Southeast Asia and a lot of the businesses that have been, these VCs have invested in over the last few years. Most of them are tech-enabled businesses which are aimed at

digitizing sectors that are very highly traditional, really highly informal. So aquaculture is one, agriculture is another one. There's a lot of opacity in terms of the data. And so I think that's also where the risk lies, because how do you know the amount of fish feed that you use and the yield that you get from it is actually what it is, unless you actually go and count every single fish, you're going to weigh every single bucket, right? And like,

as an investor the due diligence on that how do you monitor that on a super regular basis over and over again i think it's something yeah you know so maybe i will take a step back right and think about this right so for example what actually are the specific actions that the e-fishery founders did to inflate their revenue figures and actually how far back these practices go

I think if you want to start up a business, it's not up to default customers or investors, right? Probably the intention earlier is I'll give the principle of charity here and say maybe the starting off point wasn't like that. But

When did they actually started to take those actions and that was what got them caught in the end and the whole fraud is exposed? Yeah, so I think if what happened eventually was that there was a whistleblower report. So fast forward to, I guess, the course of events that unfolded over the last year, there was a whistleblower report that was sent to not just the media, but also to investors.

And there was an investigation that happened and involved, of course, an external agency to write a report and basically find out exactly what was happening. And based on that particular investigation, yeah, the results are pretty, pretty shocking. So,

So some of the things that he did included what they call round-tripping of funds. So what you do is you create small little entities or nominee entities, five of them from what I understand. And then you're like routing volumes of transactions. And this happens actually a lot in fintech, which I'm sure you should

You would know, right? In order to fake transactions, you would basically be routing these sums across these different nominee companies as a way to show your investors like, oh, okay, so you booked in X number of transactions, I don't know, the last six months or whatever like that. So that's what they call like roundtripping. Another thing that they did as well was they apparently built two sets of books.

books, one for the leadership and another one for external use, so like shareholders, banks and auditors. And in those two separate books, they basically inflated their revenue by quite a lot. And they've been doing this since 2018, which is

Also really shocking because 2018 was when they were raising for their Series A round. So the actual revenue that they actually had versus the reported revenue was like a difference of like 4.8 times, which is a lot. And then on top of that, they also doctored a lot of the invoices, the contracts and the documents to support the

accounting, the external accounting that they were reporting to their shareholders. So the shareholders were basically just deceived the entire time. I would say it's actually a really sophisticated, highly thought out

and managed process. The fraud here is not like a one-time fraud. I mean, you do get a lot of questions that how did something like this start, right? And as you correctly pointed out, and I do ask this question a lot to investors as well, like, how do you do due diligence on character? Because

When you start a company, you know, most founders want to start it because, you know, they really believe in an idea and they're giving up their jobs or whatever. Some of them have families, like they're making a significant investment into something that they really believe in, right? But the thing is, sometimes, how do you know this person is going to be the same person like five years from now or 10 years from now when he's got

multiple millions of dollars now in his in the company he's out there in the press and the press is like making him like some successful person how do you know that this person's character wouldn't end up becoming something different you know how does success get to someone's head and i don't think there's really a sure answer for this and which i guess is also part of the risk right of making any kind of investment in any kind of startup but

Yeah, in this case particularly, it seems like the shareholders were really deceived for a long time. And if the investigation never came out, I don't know if the shareholders would have known. I mean, I don't know if they suspected. Maybe they did, but...

Something happens in the due diligence process, but we don't know yet of that as well. But I want to just first ask, right? The first question I would have is, what do you think made the e-fishery story so compelling to investors?

And how did that actually contribute to the extent of the fraud? I think there is the part that the fraud is there, correct? It seems to be highly sophisticated because it's been started since 2018. At that point in time, there was this boom in funding and they are trying to probably tell the story and then they cooked up this deliberate way of actually jacking up their revenues in order to get the investments in and they just continuously perpetuate

The same strategy and essentially somebody whistleblowed and the fraud comes, right? What do you think from that investor's viewpoint, how did they read the story? Why is it so appealing to them at first and then now realize that it was actually fraud? I mean, I guess it maybe checked a lot of the boxes on a lot of things. Like one of the things that I actually didn't include in the story, which I do think may have been a contributing factor was fraud.

Around the time that Efficiary raised that unicorn round was actually, I would say, the time where there was a lot of focus on impact in ESG, which I think we still see a lot of that now. I mean, if you were a shareholder, if you were an investor and the revenue was said to be what it was, like these are not small sums, right? To be able to command a billion, over a billion dollar valuation, so to speak.

And this whole ESG aspect of supporting businesses, which don't just digitize traditional businesses, but also have a contribution to raising farmer incomes. There was an agri element, agri-agra element to it as well. There was a fintech element to it as well.

And a lot of VCs are at the stages now of also trying to raise or fulfill certain requirements on ESG to their LPs. And this is coming, of course, from institutional investors from Europe and from the US, where you do need to either in terms of your reporting or in terms of your allocation, be able to show that you are supporting businesses which

fulfill certain kind of like DEI requirements or the ESG basically, environment, social and governance kind of buckets, right? And I think in a lot of ways, by that time that they raised that big round also was really the beginning of kind of the market was beginning to cool. And you don't really have that many investors at that growth stage for you to invest in.

So it checked a lot of boxes, right? Like growth stage, supposedly profitable. They told the shareholders that they were either profitable or already profitable. Check ESG, check, which I think also raises the question, how much of this DD for companies is just a box ticking exercise, which...

I mean, I'm not an investor. I don't know how they do their DD. Maybe we go backwards a bit because there was Tanning Hub in Indonesia and then there was the Aletch, which is the lingo. One question that really now probably from the whole Southeast Asia, because the funding is also drying up due to the last two, three years.

What do you think is the impact to the actual startup and VC ecosystem within Southeast Asia itself? Yeah, I think... Oh, we go back to the dark ages again, like I think 2009 to 2000. Yeah, that era.

It's clearly not a good look. I mean, I think while I was also preparing for a chat today, I was just taking a look at some of the previous startup scandals that were covered by the press, just a way to track what was happening, similarities and differences. So I started off with my very first kind of story with

Well, not my very first story, but a big story that I did for DSA, Revolution Precrafted in the Philippines, right? Yes, correct. I remember that story. Yeah. Yeah. So that was back in 2021. And then after Revolution Precrafted, there was Zalingo in 2022. And then Taniham at Investree, which were PDB lenders in 2013, 2014. And then E-Fishery. So actually every single year we've been getting...

pretty big blow-ups. But as I was looking at the cases for each of them, I realized that actually the one thing I've noticed is the sophistication of the fraud

It's actually becoming more advanced. So just to illustrate, so okay, let's take the first one, right? Revolution Prefabs. So basically what they did was it's a Philippines company building luxury prefab homes for low-income segment. And the so-called fraud order, the issue that they had was that they

The founder was basically chasing vanity metrics, especially the unicorn title. Back in those days, being a unicorn was like a really big deal because you didn't really have that many unicorns. That's right. And what the founder was doing was he wanted to raise like 1 to 3 million at a $1.8 billion valuation. So that is something that doesn't really make sense at all, which is

And then of course, I eventually went to Manila and then we took pictures and realized, oh, they're not even delivering or building any of these buildings at all. So he wasn't actually raising that much money, but he was saying that his valuation was X amount. So what is the real size of the business? The real size of the business is actually just really small, right? So this is not even a case of like, he's taking people's money and he's pocketing it. It's like, he's just chasing for that big billion dollar, over a billion dollar valuation because it looks good. Maybe to prove a point.

Yeah, which back then you got a lot of these like slightly shady kind of characters. And then you look at Zinco. Zinco actually was more an issue of revenue recognition, which frankly, I think you see this. So when I say revenue recognition, meaning like, okay, GMV versus GTV, which one should we pick?

gross revenue versus net revenue? Which one should we take? Adjusted versus non-adjusted, a bit dark. Which one should we take? How do we tabulate the valuation on which metrics? How do we recognize which parts are real revenue and which parts are adjusted revenue? You know what I mean? I find that adjusted revenue is a very bad idea. A lot of startup founders are trying to smoke their own crack and then

put this adjusted EBITDA as a way to rationalize why they exist, where the unit economics actually don't work. They should just shut down the company and moved on.

Yeah. Yeah. That's the feeling I'm getting from all these created metrics that you mentioned. Like, for example, the Zalingo case. Exactly. Which I think was what happened with Zalingo because by the time that story broke, you know, I think we were, it was also a stage where a lot of the investors were looking at their portfolio and they were trying to figure out which ones are the performers, which are the sub-par ones and which are those that, you know what, we really got to shut them down like ASAP, right? And I think, I mean, when you look at revenue recognition, like, honestly, I don't know

This is something that a lot of companies actually face. It's not really something that's unique to Zyllingo, but I think the way that it came out and the way that it was publicized, fortunately, it made it seem... It does. This is actually a very interesting perspective. This is almost the one thing that very few people do, that all these fraud cases are becoming more and more sophisticated.

Probably the next one may be even bigger, but we don't know. We're in 2025 land now, so probably we have to wait and see how it's done, right? One problem with that international VCs involved in these startup investments in Southeast Asia, I think questions I do have, okay, and I do hear from different people, whether they are VCs themselves. I have people telling me that sometimes VCs

the associates gave the red flags and the VCs just insist on doing the deal

Is it because it's some ego trip or whatever? Because everybody is in that deal. I have to be in that deal situation. So that's one. I shall not name names. Then there is the other issue of the checkboxing thing. Like, I actually don't think that any of the VCs are not really checked on character. If you listen to all the US podcasts and the VC podcasts, they always say, I'll take the founder for a long walk and then try to really ask him his family background, everything. Yeah.

and really understand that founder, what's the real motivation? I don't think a lot of them really care about it. They just want to see, okay, is there some good schools? And then you see, okay, forget about this big mini fraud case, right? Then there are some that actually keep

doing their credentials like that clown from the company, which I think is a 3D construction company in Singapore. And then there was another two Indonesian founders claiming that they're from Berkeley. What's your sense of when people talk about due diligence, right? There's a due diligence phase because you need to find the red flags. Sometimes I feel that the way I'm seeing it is that maybe they don't really care because of the power law logic that they talk about in their VC thing.

Yeah, well, I mean, to say that they don't really care might be a little bit of a stretch because these guys are actually putting money into it, right? And I think as an investor, you do have to have a certain level of trust in your founders. You don't want to be like helicopter parenting these guys and like, you know, having to watch it. No, we're not talking about helicopter parenting. We're talking about

they don't even bother to find out what is the motivation of the founder doing this. When we talk about the character traits can be sieved out in certain tech companies when they talk about culture. No, it's pretty... I don't know. I feel like sometimes, I don't know, it can be very difficult to tell. Not that I've done any investing in startups before, but like...

I just think that, and again, back to the same question, right, which is how do you do DD on character? Because someone, it's very easy when somebody has very little in the beginning, you don't have much, and you have a dream, you try and chase it. You just don't know how people can change. Like, a million, a few million dollars is a lot to an Indonesian. Maybe it may not be a lot for a Singaporean. I mean, not to say, like, all of us are millionaires, but, like...

It's a huge deal for most of Southeast Asia, right? Most of them have never seen or touched a million dollars in their life, you know, for a long time. And so you just don't know, right? You just don't know how someone can change. And you do see a lot of these cases as well. And I don't want to say like this is just founders. I hate to say this, but there are a lot of investors as well, right? Like, especially when they start speaking to the media and they do a lot of like,

TV interviews and they suddenly think like, oh, it's about how much is seen out there, how much of it is really about the art of doing the deal, the art of getting a good return from my LPs, you know. Suddenly being a VC or being in this VC game is all about just, it becomes a bit of a narcissistic kind of endeavor. I think that's how it comes across at least.

And it doesn't help that we are operating in private capital markets, which means that there's a certain level of opacity overall in terms of how the deal is constructed, the people involved and the metrics and all that kind of thing. And I think that's where, you know, the media kind of comes in and maybe do these types of stories. It really kind of shakes everybody because you realize like, oh, okay, somebody's watching you. You're not going to get away with all of this nonsense. And it's not,

something pleasant generally like bad news is not it's a bitter pill to swallow right I still think in the grand scheme of things it's something that is good for the ecosystem overall because and you have asked me also about what this means for the Southeast Asia ecosystem going forward yeah I don't think we are in a great

time right now the capital has dried up and it's been slowly drying up for the last few years if you look at the some of the recent reports in terms of the number of deals that have been done even VC fundraising has also slowed for more than a year now it's going to be more and more difficult for VCs to be able to raise and I don't think these kinds of scandals are going to be make it any easier for them right because some of these scandals involve the LPs themselves like you talk about the

the likes of the IFCs and the ADBs. If your own LP is getting burnt or is beginning to dig out some of these things, then for some of them, it may even be their first deal in Southeast Asia, right? And they're investing with their GPs. And these GPs have spent years persuading these institutional investors like Southeast Asia, we've come a long way. We're not China, we're not India. You can come to Southeast Asia. That was literally what everyone was saying for the last three years, right?

And then if your own LP or these institutional guys, they get burnt or they see something like that in the press, why would they want to take another risk on Southeast Asia again? I think that's one of the key concerns that I keep hearing, especially in my conversations with investors these days. And I think it's a very legit concern. And it also doesn't help if you are compared against India, which actually the amount of the economy boom is 16.5x. And then if you compare to, say, Latam, you have a new bank, which is ex-

big and it's actually publicly listed. I think, to be fair also, I think there is C Group in Southeast Asia that's actually holding up and maybe with the likes of Grab and Gojek in their respective stock exchange. I think the question is the exit point where I think we don't have a lot of exits actually happening.

So maybe from your perspective, right, do you think that because of the lack of exits and then now there's so much increasing fraud happening in the region will deter a lot of future investments coming to the region? I mean, yeah, I guess in a way it will. One of the things that does need to happen actually is, and I'm curious to see if the fishery investors will eventually pursue this, is any kind of legal action against those that committed the fraud.

Because in the case of TinyHub, for instance, and Investree, right? The guys who are suspected of fraud and bribery and all that, nobody knows where they are. They just disappeared. And even now for A. Fishery, nobody knows where the founders are too, right? And if you don't pursue this into a... Because this is a massive... This is millions of dollars that is involved. This is the reputation of ecosystem involved.

If some of these people are not held accountable for their actions, then you're also sending the wrong signal, not just to founders, but to the ecosystem at large, that it is possible for you to lose millions of dollars and nothing might be done about it because maybe the ecosystem is not strong enough to be able to handle these sorts of cases. And I think, to me, I think there's a very real concern. I don't know

I honestly don't know how officially the shareholders are going to pursue it, but I think how they pursue it will also send a signal. Not just to the ecosystem, but I think it will also send a signal to the broader market.

Because if you don't punish, if these guys are not penalized, how can you assure future investors from wanting to put money into the ecosystem again? I think that will be very hard to do. I guess trust is a very important component here. As an angel investor within the ecosystem, I can...

say that a lot of times when we look at investments per se, we do our best to see what the founder is and what the founder is trying to build, right? We look for the angle that we think that is a bet. And increasingly, I think a lot of people don't realize angel investors don't make a lot of money. I think what they actually end up is actually able to get a lot of goodwill to be able to help and then to be able to see these companies grow.

Once these companies become graduated to become bigger companies, it is actually very hard for them to fundraise. I don't know, but from just looking at the data now, probably two, three years ago, there's an oversupply of capital and now there's an undersupply of capital. The question then is how is it going to change the dynamics of the market?

When you say that when these companies grow larger, it becomes more difficult to raise capital, what stage are they in? It's usually now, I think, it used to be a Series A glut. I think now in the 2018 all the way to 2022, I think A was not that hard, B was not that hard, C was harder. And then there was so-called growth capital funds and I rarely see them deploy in the region. So I find that

I think that whole Series C problem is going to preclate back down to the A and B rounds now. So actually what's going to happen is that a lot of the startups are going to find it very, very difficult if they want to do growth capital.

Which, but that's always been the case, right? When you think about A rounds in the 2018 to 2021, it's actually happened much more common. Yeah. Yeah, because I came from a time where there was pre-grab era, where even pre-seed to Series A is extremely difficult to raise. Yeah. Yeah. And when I see in 2018 from an observer point of view, and given the podcast that I've talked to a lot of the founders about,

as well, and the VCs as well, I find that period of time is probably there was just too much money to throw. Yep. And there wasn't good enough deals to take it forward. Yeah.

So you're saying that the slowdown is from Series A to Series B and Series C? Yeah. So that the whole range is going to end up slowing down on there. Yeah. Yeah, that one, yes. I think that's been happening. That's been happening. Yeah, and then the other question is, which I think no one has actually been talking about this, is the VC funds DPIs.

and how are they going to return money back to their LPs and a lot of the funds that started in 2014 have really reached their 10-year cycle. Yeah.

Yeah, we don't want to talk about it, but it's going to happen at some point in time and somebody's going to break news on it. Oh, yeah, yeah, yeah. Yeah, I'm even looking at secondary LPs who are trying to buy on the cheap. Yeah, I mean, I'm curious to see, I don't know if you have any visibility on this. And this is something that I've been asking around for the last one, two years now about secondary activity, right? Because usually in terms of a slowdown, you would expect some sort of secondary activity to pick up.

That hasn't really happened. Because the valuations have not been marked down yet. Yeah. So that's the thing. And it's also the issue for, this is from what I hear, right? Particularly Asian buyers, oh sorry, Asian sellers, not Asian buyers. Asian sellers are the ones who don't want to negotiate on the price. Yeah.

So the bid-ask gap between the buyers and the sellers has barely narrowed. And it's actually taken much longer than I anticipated than the U.S. market. Because, you know, everything starts off in the U.S. market, right? The U.S. market, the secondaries have more or less been resolved, I think, in the last two years. And you can see a lot of news on it. But you haven't seen the Asia-Pac side or even some of the other emerging economies where these secondaries is actually really...

having an effect. Because for a lot of valuations outside of US regions have not been, some of them have been marked down, but not marked down to the extent that you can actually have a secondary exit on there. So I think it will take some time or it's just that we're so, what I call, so opaque that it's actually very hard to see because it's all private companies anyway.

But I mean, I guess it also kind of speaks on the quality of the businesses, right? Like if you have a deep enough pool of people

healthy revenue generating businesses, then there shouldn't be any issue whether it comes to secondary trades or whether it comes to consolidations and M&As, right? But on both, actually, you haven't really seen... Which is why I said just now, right? Adjusted EBITDA is a wrong metric. Yeah. Or you have a high growth rate but you're losing 50 cents on the dollar. That is a wrong company to build on because the unit economy is already a problem. Yeah.

So they don't have to grow into their valuation. Yeah. And I think that is some of the things that a lot of founders don't do that. Well, in one of my part-time activity as between those years was helping some of the zombie founders to exit. And by the way, a lot of it is actually very personal because I was a field startup founder and it was very public. So I did my part to just help some of these founders to actually exit their companies.

Because they were in zombie state, they were not making revenues and they started to have families. And I have to get all these founders into jobs, into corporate jobs.

so that they can start to raise their family, even though they're entrepreneur. What happened in your case, though? That was 10 years ago. I started a high-growth company and we couldn't raise a series A. And we just tell everybody our model failed. And because I'm a media outlet founder, it was very public. I just throw it to the public. I think we made the decision that because we were not profitable, it is better off that we shut down

than trying to fabricate a fraud story, etc. At least we can try again. I remember I had to fire everybody just to make everyone's payroll. And then I had to spend the next three years shutting down the company. How long did you operate that business? Four years. Wow. Okay. Yeah. But we just couldn't raise any. We were burning cents on the dollar. I think it taught me a very good lesson. I think this is how when people think about fraud,

There are definitely, everybody starts with good intentions, but they don't, but when they reach to the crunch,

It's a question of asking the correct question whether you should be moving forward with something that's not working or you should just tell everyone it didn't work, let's just shut it down. We actually had a shutdown party and the Tech Nation guys were there. We're shutting down. I'm not joking. Because I'm already a public. At that point, I was running SGE as well. Eventually, it was sold to Tech Nation. But I think it was fair that we did exactly that.

Yeah. No, but that was, I mean, it must have been a really difficult decision to make because... Yeah, it is difficult. That's why I try to be more charitable in these situations. Sometimes the VCs are looking for power law outcomes, but maybe the businesses in the region aren't made for power law outcomes now. Getting the 10x to the 100x outcome is actually maybe better.

Because you can have that growth impact much better. Yeah. Yeah. But you see, that's also the question, like how many of our businesses can actually achieve that kind of return, right? Well, I do not know, but let me just ask these two short questions before we close today. The first one is, what's the one question about Southeast Asia that you wish people would ask you more often, but they don't? The one question that people would wish... You wish people would ask you, yeah.

I mean, I can share what I... Okay, so I actually relocated to Dubai last year. I can share what I... Because now I interact with people in the Middle East, right? I can share what they, people from the outside, kind of think about Southeast Asia. Southeast Asia, yeah. There's the question you are. Yeah. Well, I think one thing I realized, one takeaway I had is that Singapore actually has a really...

great brand. I think we tend to take that for granted being Singaporeans and we grew up in this system and we know about it but you don't actually kind of really feel it I guess until you are outside and the kind of regard that people have for

not just our systems, but I guess we have really been able to build a brand around what Singapore stands for. Whether in terms of like strong rule of law, anti-corruption, the fact that we have this whole no-nonsense attitude to clamping down on crime and things like that. Fraud. Yeah, exactly. So there's this element of like trust, trust.

around the Singapore ink kind of mindset. And definitely in the Middle East, you look at Southeast Asia and Singapore as like, okay, you guys are more advanced, which I do think that the ecosystem is about six, seven years ahead of the Middle East for sure. And then in addition to that also, I think the soft power aspect of it, right? Like Crazy Rich Asians has everything.

helped Singapore in a lot of ways and all the stuff that the Singapore Tourism Board built around like the Singapore brand and all these brand campaigns like I do think that it has added to that kind of perception of what Singapore stands for which is interesting I think that's a good thing I think Singaporeans we tend to put that put ourselves down a lot and I think

we should be better at holding our head up high a bit and using that to our advantage. Except that I wish that we have a bigger population because our market is too small. I mean, it's very unfair, unfortunately. I'm not putting us down, but it's just that we're just built with... The systems are very good. It probably matches what the US have, except that it's just too small a market. Whereas all the surrounding markets are very big.

That rule of law breaks down very easily. And that's why you're seeing so much fraud now. That is right. That is so true. Okay, my final closing question. What does great look like for Southeast Asia to live up to its expectations? For Southeast Asia to live up to its expectations. What does great look like? I hope that Southeast Asia will continue to build big, ambitious and bold industries.

businesses. And I know we're not in a great kind of time in a cycle now, but I hope that this won't be the end. I don't want to say it's the end. It's also negative. Things change. Yeah, things change. Don't worry. We all thought it was the end, but things change. Yeah. I still believe that talent, we do have talent, especially again, I'm using Singapore as an example.

There are really a lot of, we do have the key ingredients for businesses to build something. And this whole aspect again around like risk aversion, and I say this among the founders as well as to investors, and it's not something I say. I mean, this is something that is discussed even among the ecosystem people as well, right? We have everything that we need to succeed, but sometimes I find that the system doesn't reward people to take risks.

And if you don't take risks, then you will never have outlier outcomes. Many thanks for coming on the show. Just to quickly wrap up, any recommendations that have inspired you recently?

Or like book movies and stuff. Yeah. So I've been reading a little bit on the Middle East since I moved there. So right now I'm reading The Hundred Years War in Palestine by Rashid Khalidi. I've also been reading Main Street Millionaire by Cody Sanchez, who's been writing about how to acquire businesses. How do my audience find you then? They can drop me a message on LinkedIn. Yeah. Or yeah.

that's the best way to reach me so you can definitely find us on youtube all the other main outlets spotify etc many thanks for coming on the show and i look forward to speak to you again yeah thank you thank you have a good time stay safe yeah bye